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DATA ENVELOPMENT ANALYSIS 189

Figure 4.12 Excel Solution for the Hospital DEA Problem

TARGET CELL (MAX)
Name Original Value Final Value
----------------- ------------- ----------
Objective function 0 0.901677796
ADJUSTABLE CELLS
Name Original Value Final Value
--- ------------- ----------
u1 0 0
u2 0 0.012377016
u3 0 0.001900472
u4 0 0
v1 0 0
v2 0 0
v3 0 0.009606148

CONSTRAINTS
Name Cell Value Status Slack
-------------- ----------- ---------- ----------
Weight equality -0.010899304 Not Binding 0.010899304
General 0 Binding 0
University -0.098322204 Not Binding 0.098322204
County 0 Binding 0
City 1 Not Binding 0

DEA is a powerful application of linear programming and has been used to
compare efficiency across many different types of organization such as schools,
hospitals, banks, retail stores. It has proved so popular that it has its own specialist
software packages and a number of dedicated websites.

NOTES AND COMMENTS

1 Remember that the goal of data envelopment output also consumes the least of every
analysis is to identify operating units that are input. Such cases are extremely rare in
relatively inefficient. The method does not practice.
necessarily identify the operating units that are 3 In applying data envelopment analysis to
relatively efficient. Just because the efficiency index problems involving a large group of operating
is E ¼ 1, we cannot conclude that the unit being units, practitioners have found that roughly 50 per
analyzed is relatively efficient. Indeed, any unit that cent of the operating units can be identified as
has the largest output on any one of the output inefficient. Comparing each relatively inefficient
measures cannot be judged relatively inefficient. unit to the units contributing to the composite unit
2 It is possible for DEA to show all but one unit may be helpful in understanding how the
to be relatively inefficient. Such would be the operation of each relatively inefficient unit can be
case if a unit producing the most of every improved.

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